As more and more of the UK enters into a tier-three lockdown, the economic impact of the pandemic is both devastating and increasingly difficult to combat.
The UK, in the throes of a messy Brexit divorce with Europe, saw its economy shrink by 2.2% in the first quarter of the year, the largest contraction since 1979 according to official figures from The Office for National Statistics (ONS).
Then, in Q2, Gross domestic product (GDP) contracted by 19.8% in the three months to June, slightly less than the initial estimate of a quarterly 20.4% plummet but still the highest contraction of all the major advanced economies in the world.
Now, with the UK economy on a knife’s edge and lockdowns underway across the country, there is some hope that the UK can spend its way to economic recovery.
U.K. retail sales increased more than expected in September as demand for food groceries and home improvement products contributed to the largest quarterly jump since records began.
The volume of goods sold in stores and online rose 1.5% from August’s figures, surpassing economists’ expectations for a 0.2% increase. Annually, the retail sales figures for September are 4.7% higher than the same time last year. Sales jumped 17.4% in the third quarter after a lockdown-induced slump in Q2. September’s retail sales figures were 5.5% than in February before the pandemic lockdown started.
Britons Doing Their Bit But For How Much Longer?
It is fair to say that the British public is doing their bit in helping the UK economy. Lynda Petherick, head of retail at Accenture UKI said:
“There’s no doubting that UK consumers have been doing their bit to boost the economy, following a quarter of record retail sales growth,”
“There’s little time for retailers to gather breath, though, and they will already be wondering – or perhaps dreading – what lies ahead in Q4.
“This should be a time for excitement as the crucial ‘golden quarter’ for retail is now underway. However, with lockdown measures across the UK tightening by the day, retailers are braced for a difficult and unconventional end to the year.”
As lockdown restrictions tighten, it is clear that what steam is being built up may well run out very quickly. The GfK Consumer Confidence Index fell this month by the most since the start of the coronavirus pandemic lockdown.
The UK consumer sentiment index declined to -31 in October, its lowest level since late May and down sharply from September’s nine-month high of -25. The six-point decline is the largest single monthly fall since March when lockdown started.
So, can the UK consumers spend the UK into economic recovery? Only if the UK government allows them to and keeps lockdowns to a minimum, whilst protecting jobs. Otherwise, the economic effects of the coronavirus could be catastrophic for an already dangerously fragile UK economy.
